Majority of Canadian Businesses Have No Plans to Raise Prices in 2012-BMO Report

TORONTO, ONTARIO--(Marketwire - June 29, 2012) - With reduced consumer spending ranked as one of their biggest challenges this year, the majority (67 per cent) of Canadian businesses have no plans to increase prices, according to a new BMO Bank of Montreal report. Meanwhile, over half (58 per cent) are focusing on improving productivity through investments.

The BMO report, conducted by Leger Marketing, was released after the Conference Board of Canada revealed its consumer confidence index fell by nearly seven points in June to 74, back to where it was in January.

The Canadian businesses surveyed cited the following challenges as they look to the remainder of 2012 and into 2013:

Consumer spending: 22 per cent

Energy costs: 16 per cent

Labour costs: 16 per cent

Raw material costs: 11 per cent

Global economy: 9 per cent

US economy: 7 per cent

The report found that 51 per cent of businesses in the arts/culture, travel and tourism sectors were most likely to cite reduced consumer spending as their biggest challenge; by contrast only 14 per cent of businesses in the manufacturing, construction and mining/oil & gas sectors said it is a top concern. In those sectors, labour costs were the top issue at 26 per cent.

"Modest economic and wage growth, the lure of cross-border deals and global economic uncertainty have convinced many Canadian businesses not to raise prices," said Sal Guatieri, Senior Economist, BMO Capital Markets. "For many businesses, remaining competitive and focusing on productivity are primary concerns, both of which will help Canadian businesses in the long run."

Canadian Business Plans to Raise Prices

Province/Region

Plan to Charge Customers

NATIONAL

BC

AB

MB

SK

ON

QC

ATL

The SAME

63

%

67

%

62

%

64

%

67

%

67

%

58

%

52

%

LESS

4

%

6

%

2

%

9

%

---

4

%

3

%

8

%

MORE

30

%

25

%

34

%

18

%

33

%

26

%

36

%

36

%

DON'T KNOW

3

%

2

%

2

%

9

%

---

3

%

3

%

4

%

Plans to Invest in Business

Looking ahead, nearly six in ten Canadian business owners plan to invest in their business this year and into 2013. Of those businesses that plan to make investments, 88 per cent plan to invest the same or more than they did last year.

"Canadian businesses have shown a remarkable resiliency over the past couple years and are attuned to their unique markets and their customers. While raising prices is not part of the plans for many businesses, there is a focus on improving productivity through targeted investments in upgrading infrastructure and retooling business processes," said Cathy Pin, Vice-President, BMO Commercial Banking. "Recently, BMO announced a commitment to make $10 billion in credit available for Canadian businesses; with this credit certainty and an attractive interest rate environment, now is a great time for businesses to make important investments that will help them grow," added Ms. Pin.

The survey also found that in the past year Canadian businesses have taken a number of steps to improve their business performance. According to the BMO study, 36 per cent say that lower interest rates have had the most positive impact on their business, 47 per cent point to productivity improvements such as upgrading equipment and processes and 49 per cent say lowering expenses/costs have had the most positive effect on their business performance.

The online survey was conducted by Leger Marketing between March 21, 2012 and April 12, 2012, using a sample of 500 Canadian small business owners. A probability sample of the same size would yield a margin of error of ±4.38 per cent, 19 times out of 20.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $525 billion as at April 30, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.